Alessio Terzi

For too long, space has been dismissed as a science endeavour at best, and a delusionary science fiction fantasy at worst. In this article, we make three fundamental points. First, with over 80% of satellites operated by commercial entities, space already today responds predominantly to economic incentives. Second, launch costs have been on a very steep downward trend hitherto, even by historical comparison to other transport technologies. Our quantitative simulations indicate these costs could… Show more

For too long, space has been dismissed as a science endeavour at best, and a delusionary science fiction fantasy at worst. In this article, we make three fundamental points. First, with over 80% of satellites operated by commercial entities, space already today responds predominantly to economic incentives. Second, launch costs have been on a very steep downward trend hitherto, even by historical comparison to other transport technologies. Our quantitative simulations indicate these costs could credibly drop by a further 26-41% by 2030, and between 58-81% by 2040. A trade economics perspective suggests we are entering a period where (space) trade frictions are falling, and new markets will be created as a result. Third, we propose a taxonomy to help think about the creation of further value added in space going forward. For all these reasons, space should be worth of greater attention by the economics profession. Show less

Achieving climate neutrality demands a complete overhaul of our fossil fuel-dependent economic activities, encompassing energy, agriculture, transport, and more. Through historical analysis, this paper identifies parallels between the green transition and past industrial revolutions, highlighting that such transitions have always involved significant upheavals in economic and social structures.

Despite the promising prospects of green technologies fostering economic growth and job… Show more

Achieving climate neutrality demands a complete overhaul of our fossil fuel-dependent economic activities, encompassing energy, agriculture, transport, and more. Through historical analysis, this paper identifies parallels between the green transition and past industrial revolutions, highlighting that such transitions have always involved significant upheavals in economic and social structures.

Despite the promising prospects of green technologies fostering economic growth and job creation, potential short-term disruptions and growing inequalities will pose significant challenges, and inevitably unleash some political economy forces. Consequently, the future economic order can be expected to be marked by: (i) activist governments, (ii) trade fragmentation, (iii) limited voluntary technological and (iv) financial transfers between countries.

Within the contours of this emerging economic framework, policy decisions can still have first order repercussions on the speed of climate action, growth, human lives and livelihoods, within and between countries. The paper concludes by articulating five broad recommendations for policymakers in rich and poor countries, designed to maximise the advantages of the green transition while mitigating its adverse impacts. Show less

Avoiding a climate catastrophe and environmental collapse will require decarbonising our economies by mid-century, and an overall reduction in material resource use (Terzi 2022). The challenge is immense for a variety of sectors, including energy production and manufacturing, but also the built environment, given buildings and construction contribute nearly 40 per cent of overall global greenhouse gas emissions (Gates 2021; Byng 2022). How should we go about it? Posed in another way, is modern… Show more

Avoiding a climate catastrophe and environmental collapse will require decarbonising our economies by mid-century, and an overall reduction in material resource use (Terzi 2022). The challenge is immense for a variety of sectors, including energy production and manufacturing, but also the built environment, given buildings and construction contribute nearly 40 per cent of overall global greenhouse gas emissions (Gates 2021; Byng 2022). How should we go about it? Posed in another way, is modern technology the solution or ultimately part of the problem (Wainwright 2020)? Show less

- The challenges associated with today’s green transition echo dynamics during past energy revolutions
- Improvements in energy efficiency and sobriety can be part of a decarbonization strategy but with muted impact
- An effective and credible climate policy must be chiefly targeted at accelerating a Green Industrial Revolution
- Governments have many tools to do so, including taxation, regulation, public investment, and industrial policy
- Cushioning blows to income and consumption… Show more

- The challenges associated with today’s green transition echo dynamics during past energy revolutions
- Improvements in energy efficiency and sobriety can be part of a decarbonization strategy but with muted impact
- An effective and credible climate policy must be chiefly targeted at accelerating a Green Industrial Revolution
- Governments have many tools to do so, including taxation, regulation, public investment, and industrial policy
- Cushioning blows to income and consumption of low-income households will be important in avoiding social backlash, slowing decarbonization Show less

The urgent need to accelerate on, and make a national success of, the green and digital transition is leading to widespread calls for greater government involvement in the economy, including by means of an active industrial policy. After reviewing several case studies, it becomes evident that, against conventional wisdom, nearly all countries have systematically engaged in some form of industrial policy, especially large economies like the USA and China, notwithstanding their very different… Show more

The urgent need to accelerate on, and make a national success of, the green and digital transition is leading to widespread calls for greater government involvement in the economy, including by means of an active industrial policy. After reviewing several case studies, it becomes evident that, against conventional wisdom, nearly all countries have systematically engaged in some form of industrial policy, especially large economies like the USA and China, notwithstanding their very different economic models. The same is true for Europe, both at the national level and through European Union policies. After analysing these experiences, we draw six key policy lessons to inform future debates on how to shape a successful industrial policy in the years to come and mitigate its risks, while acting in a context of souring geopolitical tensions. Show less

The urgent need to accelerate on, and make a national success of, the green and digital transition are leading to wide-spread calls for greater government involvement in the economy, including by means of an active industrial policy. After reviewing several case studies, it becomes evident that, against conventional wisdom, nearly all countries have systematically engaged in some form of industrial policy, especially large economies like the USA and China, notwithstanding their very different… Show more

The urgent need to accelerate on, and make a national success of, the green and digital transition are leading to wide-spread calls for greater government involvement in the economy, including by means of an active industrial policy. After reviewing several case studies, it becomes evident that, against conventional wisdom, nearly all countries have systematically engaged in some form of industrial policy, especially large economies like the USA and China, notwithstanding their very different economic models. The same is true for Europe, both at national level and through EU policies. After analysing these experiences, we draw six key policy lessons to inform future debates on how to shape a successful industrial policy in the years to come, and mitigate its risks, while acting in a context of souring geopolitical tensions. Nonetheless, industrial policy should not undermine the integrity of the Single Market, which has been, and should remain, a central element to ensure Europe’s prosperity going forward. Show less

Rapid and sustained accelerations in economic growth can have huge implications for poverty alleviation and people's wellbeing, but does the economic profession have the knowledge to engineer them? Conspicuously disappointing outcomes for countries scrupulously following mainstream growth policy recipes have sown some doubt. This paper deploys a novel statistical approach to show that 80% of 135 successful growth acceleration episodes – occurring between 1962 and 2002 worldwide – were preceded… Show more

Rapid and sustained accelerations in economic growth can have huge implications for poverty alleviation and people's wellbeing, but does the economic profession have the knowledge to engineer them? Conspicuously disappointing outcomes for countries scrupulously following mainstream growth policy recipes have sown some doubt. This paper deploys a novel statistical approach to show that 80% of 135 successful growth acceleration episodes – occurring between 1962 and 2002 worldwide – were preceded by major improvements in standard growth determinants, and particularly orthodox policies such as economic liberalisations. However, a set of counterfactual analyses suggest that such major improvements in growth determinants are a necessary but hardly sufficient condition for success, failing to accelerate growth in 9 out of 10 instances. Our overall results indicate that to increase their effectiveness, acceleration strategies should remain focussed on mainstream growth recipes, but abandon off-the-shelf approaches or all-encompassing “shock therapy” solutions, favouring improved tailoring to local economic conditions. Show less

Gross Domestic Product (GDP) started to be used during World War II to measure the material production needs of the conflict. Throughout the decades, several issues have been identified with measuring economic success via this single indicator. Most prominently, GDP fails to inform decision makers on how the benefits of growth spread across the population, and to what extent these are concentrated in certain pockets of society. Moreover, it does not take into account the depletion of natural… Show more

Gross Domestic Product (GDP) started to be used during World War II to measure the material production needs of the conflict. Throughout the decades, several issues have been identified with measuring economic success via this single indicator. Most prominently, GDP fails to inform decision makers on how the benefits of growth spread across the population, and to what extent these are concentrated in certain pockets of society. Moreover, it does not take into account the depletion of natural resources and environmental sustainability more broadly. As these have become increasingly pressing concerns for policymakers and the public at large, over the past decade, statistical institutes (including Eurostat) have been developing new complementary indicators, which have been embraced to various degrees by several governments and international organisations. At the current juncture, the challenge is to bring these indicators into more active policy-making in a sensible and manageable way. This paper therefore reviews the pros and cons of some of the ongoing efforts, in Europe and beyond, laying out potential avenues for future scholarship on the topic. Show less

Inspired by conspicuous historical parallels, some scholars and journalists have recently postulated that GDP growth and productivity might boom in the aftermath of the Covid-19 pandemic. This paper reviews the evidence for and against the ‘Roaring 20s’ hypothesis, concluding that some countries might experience a forceful economic expansion, possibly fueled by pent-up demand, compounding a successful digital and green transition, or leveraging an export-led model. However, a strong prolonged… Show more

Inspired by conspicuous historical parallels, some scholars and journalists have recently postulated that GDP growth and productivity might boom in the aftermath of the Covid-19 pandemic. This paper reviews the evidence for and against the ‘Roaring 20s’ hypothesis, concluding that some countries might experience a forceful economic expansion, possibly fueled by pent-up demand, compounding a successful digital and green transition, or leveraging an export-led model. However, a strong prolonged economic bonanza is unlikely to materialise evenly across the EU. An uneven recovery would acquiesce imbalances within the Union, and especially the euro area. As such, policymakers should avoid complacency, and make the most of the Recovery and Resilience Facility funds, combining them with wide-reaching structural reforms, to improve economic prospects for the decade to come. Show less

The ambitious carbon-reduction targets set out by the Paris Agreement, or by recent Green Deals such as the one launched by European Commission President Ursula von der Leyen, will require a high degree of engagement with the public. This is true not only as important changes in lifestyle are going to be needed from citizens, especially in developed economies, but also because top-down measures will need public approval to be put in place. This paper reviews literature from behavioural and… Show more

The ambitious carbon-reduction targets set out by the Paris Agreement, or by recent Green Deals such as the one launched by European Commission President Ursula von der Leyen, will require a high degree of engagement with the public. This is true not only as important changes in lifestyle are going to be needed from citizens, especially in developed economies, but also because top-down measures will need public approval to be put in place. This paper reviews literature from behavioural and environmental economics, cognitive sciences, (social) psychology, health policy, and marketing to condense key insights on how to make communication on the green transition more effective in terms of citizens’ engagement. In doing so, it distils six policy recommendations that can serve as building blocks for an impactful narrative accompanying decarbonisation strategies, in Europe and beyond. If used skilfully, an effective communication and consequent behavioural change holds the promise of complementing top-down financial and regulatory tools, accelerating the green transition. Show less

Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper proposes a novel use of a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960 and 2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage… Show more

Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper proposes a novel use of a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960 and 2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the Eurozone periphery than in the standard counterfactual scenario. These results are not dictated by any specific country experience, are robust to a battery of alternative counterfactual definitions, and stand confirmed when using alternative estimation strategies, such as a Synthetic Control Model or a parametric dynamic panel regression model. Zooming in on the potential causes, the lack of an independent monetary policy, while having contributed to a deeper recession, does not fully explain the Eurozone's specificity, which is instead to be traced back to a sharper-than-usual contraction in investment and fiscal austerity due to high funding costs. These insights lend empirical backing to the proponents of more wide-reaching reforms of the Eurozone architecture, aimed at preventing some of these developments from repeating themselves. Show less

Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper uses a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960-2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the… Show more

Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper uses a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960-2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the Eurozone periphery than in the standard counterfactual scenario. These results are not dictated by any specific country experience, are robust to a battery of alternative counterfactual definitions, and stand confirmed when using a parametric dynamic panel regression model to account more thoroughly for the business cycle. Zooming in on the potential causes, the lack of an independent monetary policy, while having contributed to a deeper recession, does not fully explain the Eurozone’s specificity, which is instead to be traced back to a sharper-than-expected contraction in investment and fiscal austerity due to high funding costs. Show less

This report independently assesses the EU-Japan Economic Partnership Agreement. We find that the EPA establishes an ambitious framework to further liberalise and better organise trade, covering goods, services, intellectual property and investment, tariff- and non-tariff measures, and regulatory cooperation. Given its depth and breadth, and that it is unprecedented in including provisions on corporate governance, SMEs, and climate change, the EPA is set to become a benchmark for future trade… Show more

This report independently assesses the EU-Japan Economic Partnership Agreement. We find that the EPA establishes an ambitious framework to further liberalise and better organise trade, covering goods, services, intellectual property and investment, tariff- and non-tariff measures, and regulatory cooperation. Given its depth and breadth, and that it is unprecedented in including provisions on corporate governance, SMEs, and climate change, the EPA is set to become a benchmark for future trade agreements. Joining two open economies with high income levels and regulatory standards, the agreement is expected to generate benefits by boosting trade within sectors, minimising sectoral relocation and negative employment effects. Agri-food, textiles and leather products are where the EU can expect to make the greatest gains. Furthermore, the EPA will boost the EU’s economic presence and political relevance in the Asia-Pacific area. Going beyond its economic benefits, the agreement also has significant non-economic implications. Reinforced cooperation will enhance the ability of both parties to shape the course of global developments in a manner that better reflects their shared interests and values, such as their commitment to a rule-based global trade system and the fight against global warming.
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Setting a country’s structural growth rate on a higher path, i.e. sparking and sustaining a growth acceleration can have quantitatively huge implications for national income and, more broadly, for people’s wellbeing. We develop a novel statistical framework to identify systematically the set of binding constraints that were unlocked before the 135 growth acceleration episodes that took place between 1962 and 2002 worldwide. We employ this information to characterise the acceleration process… Show more

Setting a country’s structural growth rate on a higher path, i.e. sparking and sustaining a growth acceleration can have quantitatively huge implications for national income and, more broadly, for people’s wellbeing. We develop a novel statistical framework to identify systematically the set of binding constraints that were unlocked before the 135 growth acceleration episodes that took place between 1962 and 2002 worldwide. We employ this information to characterise the acceleration process, which tends to be preceded by a deep recession and major economic policy changes. Once we combined this information with a set of counterfactual analyses, we find however that successful acceleration strategies should not contain off-the-shelf approaches or necessarily all-encompassing “shock therapy” solutions. On the other hand, they call for a careful tailoring to local conditions. Richer countries tend to experience fewer accelerations, but once these have been ignited, they are better positioned to make the most out of them. Despite standard growth determinants doing a fairly good job at characterising successful accelerations, we note how take-offs remain extremely hard to engineer with a high degree of certainty. Show less

Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper uses a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960-2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the… Show more

Macroeconomic adjustment in the euro area periphery was more recessionary than pre-crisis imbalances would have warranted. To make this claim, this paper uses a Propensity Score Matching Model to produce counterfactuals for the Eurozone crisis countries (Greece, Portugal, Ireland, Cyprus, Spain) based on over 200 past macroeconomic adjustment episodes between 1960-2010 worldwide. At its trough, between 2010 and 2015 per capita GDP had contracted on average 11 percentage points more in the Eurozone periphery than in the standard counterfactual scenario. These results are not dictated by any specific country experience, are robust to a battery of alternative counterfactual definitions, and stand confirmed when using a parametric dynamic panel regression model to account more thoroughly for the business cycle. Zooming in on the potential causes, the lack of an independent monetary policy, while having contributed to a deeper recession, does not fully explain the Eurozone’s specificity, which is instead to be identified in a sharper-than-expected contraction in investment and fiscal austerity due to high funding costs. Reading through the overall findings, there are reasons to believe that an incomplete Eurozone institutional setup contributed to aggravate the crisis through higher uncertainty. Show less

At a time of slow growth in several advanced and emerging countries, calls for more structural reforms are multiplying. However, estimations of the short- and medium-term impact of these reforms on GDP growth remain methodologically problematic and still highly controversial. We contribute to this literature by making a novel use of the non-parametric Synthetic Control Method to estimate the impact of 23 wide-reaching structural reform packages (including both real and financial sector… Show more

At a time of slow growth in several advanced and emerging countries, calls for more structural reforms are multiplying. However, estimations of the short- and medium-term impact of these reforms on GDP growth remain methodologically problematic and still highly controversial. We contribute to this literature by making a novel use of the non-parametric Synthetic Control Method to estimate the impact of 23 wide-reaching structural reform packages (including both real and financial sector measures) rolled out in 22 countries between 1961 and 2000. Our results suggest that, on average, reforms started having a significant positive effect on GDP per capita only after five years. Ten years after the beginning of a reform wave, GDP per capita was roughly 6 percentage points higher than the synthetic counterfactual scenario. However, average point estimates mask a large heterogeneity of outcomes. Benefits tended to materialise earlier, but overall to be more limited, in advanced economies than in emerging markets. These results are confirmed when we use a parametric dynamic panel fixed effect model to control for the rich dynamics of GDP, and are robust to a variety of alternative specifications, placebo and falsification tests, and to different indicators of reform. Show less

Italy’s current system of centralised wage bargaining needs to be reformed. The system was designed without regard for the underlying industrial structure and geographical heterogeneity of the Italian economy. This has fostered perverse incentives and imbalances within Italy.

In vista della Presidenza del G7 nel 2017, questo Approfondimento si propone di esplorare
come è cambiato il ruolo del G7/8 e del G20 negli ultimi anni, descrivere il ruolo che l’Italia è
riuscita a giocare in entrambi i forum internazionali, e cercare di individuare alcuni fattori che
influenzano con una certa sistematicità l’esito dei vertici.

The euro area crisis has exposed flaws in the institutional framework of the European Economic and Monetary Union (EMU). The immediate causes of the crisis have been widely debated — including weak governance, persistent erosion of competitiveness in some countries and easy financing by banks. However, there is little discussion about a fundamental shift in the nature of European integration, which took place in mid-1990s when plans for launching the euro became credible and binding. It was not… Show more

The euro area crisis has exposed flaws in the institutional framework of the European Economic and Monetary Union (EMU). The immediate causes of the crisis have been widely debated — including weak governance, persistent erosion of competitiveness in some countries and easy financing by banks. However, there is little discussion about a fundamental shift in the nature of European integration, which took place in mid-1990s when plans for launching the euro became credible and binding. It was not understood that Europe had shifted from a Common Market Era, during which EMU’s foundations were laid, to a ‘Union Era’ which in retrospect exhibited an incomplete institutional framework. This article reviews the leap in governance now taking place, whilst taking stock of what has worked and proved resilient over the previous 60 years. This is done by means of an index — the European Index of Regional Institutional Integration (EURII) — providing a tool to synthesise and monitor European institutional integration since 1958, and track all institutional reforms since 2010. EURII has both backward as well as forward-looking components anchored on the project put forward in the 2012 Four Presidents’ Report. Show less

Greece has an imperfect track-record of structural reform implementation. However, the poor growth outcome of the Greek programmes is also a consequence of the timing and composition of reforms, which were not optimally geared towards a speedy transition to a new growth model based on the private sector. While the main responsibility for this lies with the Greek authorities, international institutions share the responsibility for the poor growth-enhancing effect of reforms.

In the… Show more

Greece has an imperfect track-record of structural reform implementation. However, the poor growth outcome of the Greek programmes is also a consequence of the timing and composition of reforms, which were not optimally geared towards a speedy transition to a new growth model based on the private sector. While the main responsibility for this lies with the Greek authorities, international institutions share the responsibility for the poor growth-enhancing effect of reforms.

In the current context, further structural reform efforts should be mainly targeted at supporting Greece's speedy return to solid growth rates. This is not only because poverty and unemployment have reached very high levels, but also for political economy reasons: reforms must quickly be seen to be working in order to buttress the consensus in favour of reform.

Further efforts should be made to improve Greece’s business environment and to liberalise product markets, in addition to shifting taxation away from labour and towards consumption. Reforms to improve the quality of institutions should continue and are very much needed in the Greek setting, while taking into account that their demanding implementation might use up administrative capacity and their impact on growth will only be seen over long time horizons. Show less

Government intervention to stabilise financial systems in times of banking crises ultimately involves political decisions. This paper sheds light on how certain political variables influence policy choices during banking crises and hence have an impact on fiscal outlays. We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. Governments in… Show more

Government intervention to stabilise financial systems in times of banking crises ultimately involves political decisions. This paper sheds light on how certain political variables influence policy choices during banking crises and hence have an impact on fiscal outlays. We employ cross-country econometric evidence from all crisis episodes in the period 1970-2011 to examine the impact political and party systems have on the fiscal cost of financial sector intervention. Governments in presidential systems are associated with lower fiscal costs of crisis management because they are less likely to use costly bank guarantees, thus reducing the exposure of the state to significant contingent and direct fiscal liabilities. Consistent with these findings we find further evidence that these governments are less likely to use bank recapitalisation and more likely to impose losses on depositors Show less

• The single market is often perceived as the panacea for Europe’s economic troubles. It is believed that completing the single market would boost welfare, stimulate growth and increase European competitiveness.

• However, identifying and quantifying the channels through which market integration is expected to engender growth is methodologically complex. Although the overwhelming prediction from the literature is for single market integration to generate positive and significant… Show more

• The single market is often perceived as the panacea for Europe’s economic troubles. It is believed that completing the single market would boost welfare, stimulate growth and increase European competitiveness.

• However, identifying and quantifying the channels through which market integration is expected to engender growth is methodologically complex. Although the overwhelming prediction from the literature is for single market integration to generate positive and significant aggregate effects, we conclude that the impact so far has fallen short of initial expectations, because:

(1) Barriers continue to prevail in the EU, preventing the exploitation of the potential benefits of full market integration

(2) ‘Complementary policies’ to support the single market were not, or were insufficiently, put in place

(3) The single market project has not sufficiently been framed as a key part of the process of creative destruction that Europe needs to embrace to successfully modernise its economy.

• That single market integration generates positive and significant aggregate effects does not imply that its effects are positive and significant for every sector. There is therefore an important role for European Union and national distributional policies to ensure that losers are sufficiently compensated by the winners, and to overcome political resistance to completing the single market. Show less

This paper presents a European Index of Regional Institutional Integration (EURII), which maps
developments in European integration from 1958 to 2014 on the basis of a monthly dataset. EURII
captures what we call: (i) the “Common Market Era”, which lasted from 1958 until 1993; and (ii) the
first twenty years of the “Union Era” that started in 1994, but gained new impetus in response to the
euro area crisis. The paper complements the economic narratives of the crisis with an… Show more

This paper presents a European Index of Regional Institutional Integration (EURII), which maps
developments in European integration from 1958 to 2014 on the basis of a monthly dataset. EURII
captures what we call: (i) the “Common Market Era”, which lasted from 1958 until 1993; and (ii) the
first twenty years of the “Union Era” that started in 1994, but gained new impetus in response to the
euro area crisis. The paper complements the economic narratives of the crisis with an institutional
approach highlighting the remedies to the flaws in the initial design of Economic and Monetary
Union (EMU). In fact, since 2010, EMU’s institutional framework has been substantially reformed.
While work on EMU’s new governance is still in progress, the broad contours of a “genuine union”
have been outlined in the Four Presidents’ Report of December 2012. The report envisages a more
effective economic union, a fiscal union, a financial union, and a commensurate political union.
The aim of the EURII index is threefold: (i) to provide a tool to synthesise and monitor the process
of European institutional integration since 1958 and, in particular, track institutional reforms
since 2010; (ii) to expand a previous integration index by showing that monetary unification – which
was initially understood as “the cherry on the Internal Market pie” – implied a major discontinuity
in the process and nature of European integration, that is, a new “pie on the cherry”; and (iii) to
offer a tool for further research, policy analysis and communication. Show less

During the 2008 financial crisis, the G20 was hastily elevated to ‘global economic steering committee’. In the early stages of the crisis, the G20 was an effective forum for crisis containment. As the crisis has eased, however, the G20 has lost both direction and momentum. Governments and policymakers have felt less need to act in unison and have rather refocused on their national agendas, as is their duty and primary function. However, effective global governance is needed permanently, not… Show more

During the 2008 financial crisis, the G20 was hastily elevated to ‘global economic steering committee’. In the early stages of the crisis, the G20 was an effective forum for crisis containment. As the crisis has eased, however, the G20 has lost both direction and momentum. Governments and policymakers have felt less need to act in unison and have rather refocused on their national agendas, as is their duty and primary function. However, effective global governance is needed permanently, not just in crisis times. It is desirable to have more representative and effective global governance that, among other things, is equipped to prevent crises rather than just react to them.

In an environment of rapid change in global patterns of trade and wealth creation, a new revamped (but highly representative) grouping should be created within the G20, to provide leadership on key economic policy matters. Euro-area members should give up their individual seats in this G7+, allowing room for China and other large emerging economies. Without euro-area countries taking such a step, it would be impossible to reconcile effectiveness and representation in this new G7+, which would take charge of decision making on global economic imbalances, financial and monetary issues. All existing G20 countries, including individual euro-area countries, would however remain in the G20, which could potentially expand and would remain the prime forum for discussion on all remaining matters at global level. Show less

Europe faces major social challenges, in which fiscal consolidation may have played a role. This Policy Department A study aims to provide the Committee for Employment and Social Affairs with an analysis of the speed and composition of fiscal consolidation strategies. It describes major social developments in Europe, with a focus on poverty, and considers and interprets the links between fiscal consolidation measures and social developments.

The world economy is going through its biggest transformation in a relatively short space time. There have been many explanations for this phenomenon but the unprecedented scale and pace of this change and, most crucially, its implications, still seems little understood. In turn, there has been little preparation for, or adjustment to, this changing world, though if the change continues at this pace, the effectiveness of many global institutions in their current form will be… Show more

The world economy is going through its biggest transformation in a relatively short space time. There have been many explanations for this phenomenon but the unprecedented scale and pace of this change and, most crucially, its implications, still seems little understood. In turn, there has been little preparation for, or adjustment to, this changing world, though if the change continues at this pace, the effectiveness of many global institutions in their current form will be threatened.

We highlight the dramatic degree of the shifts taking place in world GDP and trade and include fresh projections of what world trade patterns might look like in 2020, should the trends observed over the past decade to continue. We also show the resulting shift in trade relationships for many key countries. European member states tend to have quite different trading partners’ profiles, and this heterogeneity is quite likely to become more pronounced with time. This, in turn, suggests a significant challenge for the effective functioning of the euro area and weakens the original rationale of its creation.

If our projections to 2020 are broadly right, then many established frameworks for the running of the world economy and its governance are not going to be fit for purpose, and will need to change. The global monetary system itself, and global organisations such as the IMF, G7, and G20 are going to have to adapt considerably if they want to remain legitimate representatives of the world order. The alternative is their relegation to irrelevance. Show less

This study provides a systematic evaluation of financial assistance for Greece, Ireland, Portugal and Cyprus. All four programmes, and in particular the Greek one, are very large financially compared to previous international programmes because macroeconomic imbalances and the loss of price competitiveness that accumulated prior to the programmes were exceptional. Yet programmes were based on far too optimistic assumptions about adjustment and recovery in Greece and Portugal. In all four… Show more

This study provides a systematic evaluation of financial assistance for Greece, Ireland, Portugal and Cyprus. All four programmes, and in particular the Greek one, are very large financially compared to previous international programmes because macroeconomic imbalances and the loss of price competitiveness that accumulated prior to the programmes were exceptional. Yet programmes were based on far too optimistic assumptions about adjustment and recovery in Greece and Portugal. In all four countries, unemployment increased much more significantly than expected. Although fiscal targets were broadly respected, debt-to-GDP ratios ballooned in excess of expectations due to sharp GDP contraction. The GDP deterioration is due to four factors: larger-than-expected fiscal multipliers, a poorer external environment, including an open discussion about euro area break-up, an underestimation of the initial challenge and the weakness of administrative systems and of political ownership. The focus of surveillance of conditionality evolved from fiscal consolidation to growth-enhancing structural measures. The Greek programme is the least successful one. Ireland successfully ended the programme in December 2013, but problems remain in the banking system. Exit from the Portuguese programme in May 2014 appears feasible but it should be accompanied by a precautionary credit line. It is too early to make pronouncements on the Cypriot programme, which only started in May 2013, but it can safely be said that there have been major collective failures of both national and EU institutions in the run-up of the programme. Show less

This paper analyses the Commission's forecast track record, by building on previous analyses
conducted at the end of the 1990s (Keereman, 1999) and updated just before the beginning of the
economic and financial crisis (Melander et al, 2007). The extension of the observation period to
2011 allows a first analysis of forecast accuracy during the years of the economic and financial
crisis. Beyond this most recent development, this update also includes a comparison of forecast… Show more

This paper analyses the Commission's forecast track record, by building on previous analyses
conducted at the end of the 1990s (Keereman, 1999) and updated just before the beginning of the
economic and financial crisis (Melander et al, 2007). The extension of the observation period to
2011 allows a first analysis of forecast accuracy during the years of the economic and financial
crisis. Beyond this most recent development, this update also includes a comparison of forecast
errors in all past recession and non-recession periods. For the first time, the track-record analysis
includes the Member States which joined the European Union in 2004 and 2007. Moreover, the
accuracy analysis was expanded to encompass also short-term GDP growth forecasting. As in
previous exercises, a comparative analysis of the forecasts by the European Commission, IMF and
OECD is carried out.
Over the full timespan, forecasts for the EU and euro area are found to be generally unbiased. The
same holds true for the outlook for most Member States, largely confirming earlier results.
Moreover, the Commission services track record appears generally in line with that of the OECD, IMF and Consensus Economics, and in some cases better. Finally, while the analysis points to a limited impact of the crisis on the accuracy of the Commission's current-year forecasts, a significant deterioration of the accuracy of year-ahead projections is found. This applies in particular for the forecasts of GDP, investment, inflation and the government budget balance, due mainly to larger forecast errors in the recession year 2009, which by all standards proved exceptional and
unanticipated by institutional and market forecasters.
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